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of <h1>Single Show Cause Notice for Multiple Years Violates GST Sections 74(10) and 136; Year-wise SCNs Required</h1> <h3>Ms RA And Co Represented By Its Partner Murali Nellaiyah Versus The Additional Commissioner Of Central Taxes, Chennai</h3> The HC held that issuance of a single show cause notice (SCN) covering multiple financial years under Sections 73/74 of the GST Act is impermissible. Each ... Bunching of Show Cause notices - issuance of a single SCN for more than one financial year - HELD THAT:- In terms of sub-section (1) of Section 73/74 of the GST Act, on the person chargeable with tax, which has not been paid, etc., requiring him to show cause as to why he should not pay the amount specified in the notice, along with the interest and penalty, for various situations mentioned therein. Section 73(10)/74(10) of the GST Act specifically provides the time limit of 3 years/5 years from the last date for filing the annual returns for the financial year to which the tax dues relates to. Thus, the GST Act considered each and every financial year as separate unit, due to which, the limitation has been fixed for each and every financial year separately. When such being the case, clubbing more than one financial year, for the purpose of issuance of show cause notice, would not be considered as in accordance with the provisions of Section 73/74 of the GST Act. Therefore, the limitation period of 3 years/5 years would be separately applicable for every financial year, thus, the limitation period would vary from one financial year to other. It is not that the limitation would be carried over or continuing in nature, so as to, club the financial years together. For these reasons also, the bunching of show cause notice is impermissible. There is no doubt that in terms of GST Law, “any period”, for the purpose of issuance of show cause notice, includes, “monthly tax period” or “yearly tax period” and the GST Act will not permit for issuance of show cause notice beyond such period, i.e., no show cause notice can be issued for the period of more than one financial year - a conjoint reading of the word “tax period”, as defined in Section 2(106) of GST Act, along with the provisions of Section 73(1),(2),(3),(4),(10)/74(1),(2),(3),(4),(10) of GST Act, makes it very clear that there is a specific bar in terms of the Section 73/74 for “bunching of show cause notice”, i.e., no show cause notice can be issued for more than one financial year. The issuance of composite show cause notice covering multiple financial years making composite demand for multiple years without separate adjudication per year frustrate the limitation scheme and prevents the petitioner from giving year-specific rebuttals, which results in jurisdictional overreach, i.e., the proper officer acts without authority of law, rendering the order void ab initio. Further, the impugned order is passed in contravention of clear statutory safeguards under Section 74(10) and Section 136 of GST Act. The GST Act permits only for issuance of show cause notice based on the tax period. Therefore, if the annual return is filed, the entire year would be considered as a tax period and accordingly, the show cause notice shall be issued based on the said annual returns - If show cause notice is issued before the filing of annual returns, the same can be issued based on the filing of monthly returns. Petition allowed. ISSUES: Whether issuance of a single show cause notice covering more than one financial year ('bunching of show cause notices') is permissible under Sections 73 and 74 of the GST Act, 2017.Whether a single assessment order can be passed for multiple financial years.Whether the limitation periods prescribed under Sections 73(10) and 74(10) of the GST Act apply separately to each financial year or can be clubbed across years.Whether issuance of composite show cause notices causes prejudice or hardship to the assessee, including in availing compounding under Section 138 or amnesty schemes under Section 128 of the GST Act.The proper interpretation of 'tax period' under Section 2(106) of the GST Act in relation to issuance of show cause notices.Whether issuance of composite notices violates the statutory safeguards and results in jurisdictional overreach. RULINGS / HOLDINGS: The issuance of a single show cause notice for more than one financial year is impermissible under Sections 73 and 74 of the GST Act, as there is a 'clear bar for 'bunching of show cause notice''.The GST Act contemplates issuance of show cause notices based on distinct 'tax periods', which include monthly or yearly tax periods, but not periods extending beyond one financial year; therefore, no notice can be issued for more than one financial year.The limitation periods of three years under Section 73(10) and five years under Section 74(10) apply separately and independently to each financial year, and cannot be clubbed or carried over across years.Passing a single assessment order for multiple financial years is not permissible and results in prejudice to the assessee's rights, including inability to file compounding applications under Section 138 or avail amnesty schemes under Section 128 for particular years.The 'tax period' as defined in Section 2(106) means the period for which the return is required to be furnished, i.e., monthly or annual returns, and show cause notices must be issued accordingly.Issuance of composite show cause notices covering multiple financial years frustrates the limitation scheme, prevents year-specific rebuttals, and constitutes jurisdictional overreach rendering such orders void ab initio. RATIONALE: The Court relied on the statutory framework of Sections 73 and 74 of the GST Act, which require issuance of show cause notices for 'any period' defined as 'tax period' under Section 2(106), interpreted as monthly or annual periods, but not multiple financial years combined.Sections 73(3) and 74(3) allow issuance of statements deemed to be notices for subsequent tax periods only if they share the same grounds as the initial notice, reinforcing the requirement for separate notices per tax period.The limitation provisions under Sections 73(10) and 74(10) fix separate time limits for each financial year, supporting the conclusion that notices and assessments must be year-specific.The Court referenced precedent from a Constitution Bench of the Supreme Court holding that 'where an assessment encompasses different assessment years, each assessment year could be easily split up and dissected and the items can be separated and taxed for different periods,' applying this principle to GST assessments.Judicial precedents from this and other High Courts (e.g., Titan Company Ltd. case and M/s. Tharayil Medicals case) were cited to emphasize that bunching of notices is impermissible and causes prejudice to the assessee's rights and statutory safeguards.The Court noted that composite notices undermine the statutory scheme by potentially extending limitation periods improperly and denying the assessee the opportunity for focused defenses and remedies per financial year.The reasoning also considered practical hardships arising from bunching, such as inability to avail compounding or amnesty schemes selectively and difficulties in gathering evidence within truncated time frames.The Court rejected the respondent's argument that 'any period' includes multiple financial years, clarifying that 'tax period' is tied to return filing requirements and cannot be arbitrarily extended.
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